Rolls Royce to unveil major restructuring

The company is expected to outline a plan to save £150M-£200M a year from 2017 in a presentation today.

Since taking over as CEO in July, Warren East has undertaken a review of the firm’s operations and will present his initial findings, including details of actions being taken to improve both disclosure and transparency, the firm said.

The strategy update, which follows Rolls-Royce’s fifth profit warning in less than two years, comes as the troubled engine maker faces pressure from activist investor ValueAct which recently hiked its holding in the group.

Shares in Rolls-Royce have plunged 15 percent since November 11, the day before its fourth profit warning in just over a year, as it struggles to cope with shrinking demand for marine engines and declines in its aero-engine business, where fewer of its older, more profitable engines are bought or require servicing.

Although the company is cutting costs, Mr East refused to be drawn on the precise number of jobs that might be lost.

“These changes, while more painful than we expected in the near-term, are vital to our long-term success”.

Rolls-Royce (OTCPK:RYCEY) is planning a “major restructuring” as the embattled aircraft-engine manufacturer’s new chief executive officer moves to streamline senior management and lower fixed costs.

It has previously announced 3,600 job cuts across the group.

“This is fundamental to ensuring Rolls-Royce best positions itself to compete for the long term opportunities before us”, Mr East added.

That could put the board at odds with hedge fund ValueAct, which doubled its stake in Rolls-Royce last week to 10 percent.

A European Union probe into levels of competition in maintenance, from which aero-engine companies derive the bulk of revenue, is focused mainly on the single-aisle market and therefore doesn’t much concern Rolls, East said.

Rolls-Royce chairman Ian Davis said in a statement that the board was committed to providing East with the support he needed to implement the findings of his review.

Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said the latest announcement marked the start of the new chief executive’s battle to restore investor confidence.